In Coneff v AT&T Corp., (9th Cir. Mar. 16, 2012), current and former customers of AT&T brought a class action claim alleging that AT&T intentionally changed its service to force customers to switch to more expensive and less favorable plans, violating several state consumer protection statutes, common law and the Federal Communications Act. AT&T responded by seeking to compel arbitration pursuant to an arbitration clause in the claimants' service agreement. The arbitration clause required all individuals to arbitrate all disputes and claims and prohibited class actions and class arbitrations. The claimants argued that the arbitration provision was unenforceable because it was substantively and procedurally unconscionable.

The district court denied AT&T's motion to compel arbitration because it found that, under Washington state law, the class action waiver was substantively unconscionable and thus unenforceable. Since the arbitration clause stated that the entire arbitration clause would be unenforceable if the class action waiver was found unenforceable, the district court found the entire arbitration clause unenforceable. The district court did not address the claimants' procedural unconscionability argument because it concluded that substantive unconscionability alone voided the contract. AT&T appealed.

The Ninth Circuit explained that in AT&T Mobility LLC v Concepcion, 131 S. Ct. 1740 (2011), the Supreme Court recently held that the FAA preempts state laws that purport to invalidate class action waivers as substantively unconscionable (see Legal update, Supreme Court holds that Federal Arbitration Act preempts California rule on unconscionability: full update). The court then rejected the claimants' argument that Green Tree Fin. Corp.-Ala. v Randolph, 531 U.S. 79, 90 (2000) creates an exception to Concepcion by permitting states to invalidate class action waivers if the waiver prevents plaintiffs from vindicating statutory rights. Rather, the court is bound by the Supreme Court's recent holding in Concepcion, where the Supreme Court stated "unrelated policy concerns, however worthwhile, cannot undermine the FAA." The Ninth Circuit, however, noted that Concepcion provides little guidance on procedural unconscionability and remanded for further proceedings the issues related to the claimants' procedural unconscionability claims.

This case demonstrates application of the Supreme Court's recent opinion in Concepcion that the FAA preempts state substantive unconscionability laws that invalidate class action waivers. The case, however, leaves open the possibility of invalidating class action waivers based on procedural unconscionability.